Dairy outlook divided as processors send mixed signals

Livestock farmers are likely to notice changes to their milk cheques in the coming months as global dairy markets wake up after a quiet summer.

After months of flat prices and little direction, a recent wave of farmgate price adjustments has jolted markets back into life and reignited activity across the sector.

Major processor Muller lifted its price into September and has now committed to holding into October at 42.75p/litre for a standard liquid litre, including its quarterly advantage premium.

See also: Arla and First Milk report solid revenue growth in 2025

Cheesemaker Barbers has also held firm at 45.08p/litre for a standard manufacturing litre in October.

Meanwhile, Arla has cut its conventional milk price by 0.87p/litre to 47p/litre, based on a manufacturing litre, and held its organic price at 57.86p/litre, despite recently reporting strong revenue growth in the first half of the year.

The European co-operative hinted at a softening outlook, with commodity markets down and increased global milk supplies.

First Milk followed suit and reduced its manufacturing litre by 1p/litre to 43.85p/litre in October, including the member premium.

Freshways has bucked the trend, raising its farmgate milk price by 2p/litre from 1 October, citing increased demand at retail.

Dairy commodity markets

Wholesale dairy values dropped by 4.3% at the latest fortnightly Global Dairy Trade (GDT) auction on 2 September.

The GDT price index fell to average $4,043/t (£3,015/t), with prices down for whole and skimmed milk powder, butter and mozzarella.

Independent dairy market analyst Chris Walkland told Farmers Weekly the auction results were not terrible and could have been a lot worse, although he warned that a run of poor auctions in the months ahead could put further pressure on the dairy sector.

“If there is another auction that is down 4% then that is obviously even more worrying,” he said.

Mr Walkland added that he could see farmgate milk prices potentially softening over the next six months, as a result of falling dairy commodity prices.

UK and EU wholesale values have started to ease back slightly in recent weeks, with butter, cream and cheddar prices all in decline.

GB milk supplies are still tracking at roughly 5% higher than at this time last year, with the milk-to-feed price ratio currently incentivising dairy farmers to produce greater volumes.

Milk production volumes may decline later in the year, with tight fodder supplies and the prospect of lower milk prices reducing the incentive for farmers to pursue higher output and purchase additional feed.

“A lot will also depend on what the forage situation is over the winter, and that is very sporadic around the country at present,” said Mr Walkland.

Evolving supply chains

A recent report titled Decoding Dairy Disruption, by Kite Consulting, found that the UK dairy sector is beginning to pivot from a heavy focus on liquid milk historically to exports of cheese and milk powders.

Consultants at Kite highlight that processors such as Arla and Muller are investing heavily in export capabilities, with UK milk increasingly tied to global markets where premium products command higher returns.

Export markets offer huge potential for UK dairy, with HMRC figures showing exports were up by 20% during the first half of 2025 to total £1.1bn, driven in part by strong European demand.